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5.1 The results vary by diversification regime: Economic Report on Africa 2007

Guest post by: United Nations Economic Commission for Africa

Article Overview: At this point, it is worthwhile to recall the five diversification regimes: those countries with little diversification; countries that started but got stuck in the diversification process; those with deepened diversification; backsliders in diversification; and the conflict and post-conflict countries. This report suggests that belonging to a particular regime has more to do with policy and institutional factors at the country level. Consequently, there are different determinants when the discussion is brought to the country level (see table A5.2 for correlation results).

5.1 The results vary by diversification regime: Economic Report on Africa 2007

At this point, it is worthwhile to recall the five diversification regimes: those countries
with little diversification; countries that started but got stuck in the diversification
process; those with deepened diversification; backsliders in diversification; and
the conflict and post-conflict countries. This report suggests that belonging to a
particular regime has more to do with policy and institutional factors at the country
level. Consequently, there are different determinants when the discussion is brought
to the country level (see table A5.2 for correlation results).

The results for selected African countries represent the different diversification
regimes, namely, for Tunisia, Kenya, Nigeria, Burkina Faso and Sudan. Tunisia,
representing a regime with deepened diversification, shows significant results in relation
to investment, inflation and exchange rate while it is negatively and significantly
related with income per capita, trade and country risk. Tunisia follows the more
general African results with respect to the influence of per capita income, inflation,
exchange rate and country risk on diversification. Nonetheless, two factors, level of
investment and openness, have opposite directions in relationships from the general
continental evidence.

Kenya is an example of a country where diversification took off but was not able to
go very far. In this case, per capita income was a strong determinant of diversification.
The exchange rate was also significant to diversification results in the country.
This is also consistent with the continental results. Like Tunisia, Kenya’s openness
tended to deepen diversification rather than restrain it. Investment, growth in manufacturing
value added, inflation and country risk have not played significant roles
in the diversification outcomes for Kenya.

Nigeria is an example of an African country where oil dominates exports. Hence,
Nigeria is a highly specialized economy in terms of export products. Nigeria’s oil
exports account for 98 per cent of its total export value. These results are inconsistent
with the continental results, especially with regard to the influence of investment,
income, trade, exchange rate and country risk. However, the diversification
question is dominated by the oil factor in Nigeria’s export products.

In the case of Burkina Faso and Sudan, countries representing the regimes of limited
diversification and of conflict, respectively, the relationships shown by the correlations
do not indicate any plausible economic inferences and the data plots have no
clear patterns. In both cases, no clear relationship between the different economic
variables and diversification allowed reasonable conclusions to be drawn regarding
countries in these regimes.

Related Articles
  4.0 Diversification trends in Africa: Economic Report on Africa 2007
  4.3 Conclusion: Economic Report on Africa 2007
  4.2 Diversification regimes in Africa: Economic Report on Africa 2007
  5.0 Diversification and Growth: Economic Report on Africa 2007
  5.2 Growth, productivity and diversification: Economic Report on Africa 2007

Article Tags: african countries, backsliders, burkina faso, correlation, country risk, determinant, determinants, diversification, exchange rate, export products, inflation, institutional factors, investment growth, kenya, nigeria, openness, per capita income, regime, regimes, table a5



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